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AUSTRALIAN INDUSTRY GROUP EXPORTERS GUIDE 2015 -- 2016 l 81
Insurance laws in many countries
and jurisdictions prohibit foreign
insurers from providing cover for a
local risk on a non-admitted basis. In
these situations, an Australian insurer
has two options: it can either obtain a
local licence to issue insurance contracts
in that jurisdiction, or it can enter into
a fronting arrangement with an insurer
licensed in that country, whereby the
local insurer issues an admitted policy as
a front for the Australian insurer's policy.
This means that property and
persons located in that non-admitted
territory can only be insured via a
policy issued by an authorised local
underwriter. Contravention of this
requirement (law) will render the
contract unlawful.
Matters to take into consideration
when faced with a requirement for
a fronting arrangement, or for a
non-admitted jurisdictional issue, can
include:
• time – allow suffcient time to
check legislative requirements and
negotiate with fronting partners
• cost -- jurisdictional requirements
will differ signifcantly, and
additional costs will need to be
added to any locally established
premium, including fees, taxes,
charges and compulsory local
premiums
• process -- in some jurisdictions, the
premium may need to be paid in
the jurisdiction itself, and/or a local
broker engaged for the placement.
Recent New Zealand changes
The general idea of the
requirement suggests:
1. Ifthepolicyisinthenameofa
New Zealand entity, it needs to be
insured on New Zealand paper
2. If the policy is in the name of an
Australian entity and there are New
Zealand subsidiaries included on
the policy, including being listed
as a named insured, this can be
insured on non-admitted paper --
e.g. Australian insurer.
Disclaimer: this article is for information
purposes only, and is not legal advice.
Marine transit -- non-admitted
insurance policies
Content provided by MGA Insurance Brokers